GBP-JPY Forming Another Flag

By: Mike Kulej The intervention in the Japanese Yen last month was targeting the USD-JPY exchange rate, which was at an all time low. While other Yen crosses were not at extreme levels, they also benefited from that action, in most cases eve more than the US Dollar. One of them was the GBP-JPY, the ever-popular “beast”. For about a week following the intervention, it settled into a sideways pattern, before the uptrend developed. Over the last two weeks the GBP-JPY rallied about 1000 pips with very little pause. During that time, we can find only two brief slow-down periods on the intermediate term chart, both of them in the form of a flag.

What's Going on Now?

Currently the price is forming yet another one of these patterns. Flags are continuation formations, so we could expect another move up, perhaps as high as 142.00. This particular flag is not as tight as the previous examples, but this is typical in an advanced trend. Of course, this also means that flags at this stage also have somewhat higher failure rate.

If the price breaks out to the upside, we would like to see a confirmation using other tools. During this uptrend, the ADX has been working just fine in this role by showing an uptick on a move. We would like to see the same behavior here, with the ADX turning north. This would improve chances for another good size swing in the GBP-JPY. 
http://www.dailyforex.com/forex-technical-analysis/2011/04/GBP-JPY-Forming-Another-Flag/7642